Small, no-frills subcompact cars are already selling in India and Eastern Europe at prices in the $7,000 range. Now the race is on to sell new cars for even less: $3,000 and under. Automakers outside the United States know the average price for a new vehicle is beyond the reach of many consumers. And hundreds of millions of consumers in China, India, Brazil, Russia and elsewhere in the world are expected to join the middle class in the coming decade.
Is it too much to assume that cars will be at or near the top of their shopping lists? Not according to BusinessWeek, which reports that the market for low-price cars is huge, due to the global demographic shift. “The luxury segment continues to grow, cheap cars boom, and everything else gets squeezed,” BusinessWeek reports. “By 2012, the market for vehicles priced under $10,000 is likely to reach 18 million cars” — up from 12 million today — “or a fifth of world auto sales,” the publication notes of Roland Berger Strategy Consultants' estimates.
When Indian automaker Tata Motors made its vow to build a $2,500 car, many Western auto executives ridiculed the project, dubbing it a four-wheel bicycle. Tata Group Chief Ratan Tata told shareholders last year that the launch of the car would “create a new paradigm in low-cost personal transport, carve out a new market segment and reach a broader base of the pyramid,” according to Rediff News. “The car will be launched in early 2008 and we believe it will be extremely attractive to the Indian consumer, particularly younger families,” at a price level of about 100,000 rupees (US$2,500), Tata said.
India is Asia’s fourth-largest automobile market, according to Forbes, and compact hatchbacks account for three-quarters of passenger vehicle sales, which grew 13 percent last quarter. Auto execs aren’t laughing anymore, as BusinessWeek points out. French automaker Renault and Romania's Dacia already have a runaway hit with their Logan sedan. In 2004, the automakers began offering their bare-bones auto in Europe for just $7,200, some 40 percent less than rival sedans, and have since sold 450,000 of these models in 51 countries. No doubt irritating top managers at Detroit’s “Big Three” offices — whose share of the U.S. market dropped below 50 percent last month for the first time in history — the race for cheap cars is of concern to some European automakers, too. Consider the high profit margins many are used to: BMW earns an estimated $3,000 per car on average versus Logan’s $400 per car, BusinessWeek quotes Ferdinand Dudenhoffer, director of the German Center for Automotive Research, as having said.
Auto companies are counting on volumes to make profits as they develop cheaper cars amid rising costs of raw materials like aluminum, adds Forbes. “The market for these vehicles could start with a quarter million units and rise to over a million, auto analyst Ashustosh Goyal at Edelweiss Capital told Forbes.
The Logan is so popular, apparently, that two plants work 24 hours a day and still struggle to keep up with demand.Credit: Renault/Dacia
But, he added, demand would increase only if multiple automakers roll out offerings in a similar price range. China’s Geely makes a car for $3,900, and it is aiming to export the car to the U.S. by 2010. Suzuki Motor Corp., which sells cars starting at $4,400 in India, will launch a new compact in 2008 and export it to Europe. Korea’s Hyundai Motor is offering its Santro for $6,300 in India. The company will also export cars to Europe, Russia and Latin America.
In Japan, Toyota is working on a car with an expected price of under $7,000 that could enter emerging markets such as India and Brazil by 2009. General Motors intends to use its Korean subsidiary GM Daewoo to design a model that also will sell for about $7,000. Chrysler is developing low-cost cars with Chinese manufacturer Chery. Mitsubishi Motors Corp. is developing a low-priced car for emerging economies in Asia based on the automaker’s fuel-efficient Colt, writes Bill Belew, writer for PanAsianBiz.com, at Rising Sun of Nihon, a blog covering Japan’s economy and industry. Belew cites The Nikkei Weekly in anticipating the car’s price to be about $8,000.
Volkswagen, Fiat and Peugeot have also vowed to build cut-rate Logan-killers.
Low-cost cars are “the single most important trend in the automotive industry today,” according to Vikas Tibrewala, the Paris-based executive director of the Monitor Group consultancy. “Automakers will have to live with a trend of lower-cost vehicles. It is difficult but that’s where the demand is,” David Nicholas (Nick) Reilly, president of GM Asia Pacific, told BusinessWeek.
Some big questions remain, though: Will quality for these basic cars be up to par? Will the cheap and compact cars be able to combine modern comfort with safety and reliability at a fraction of today's cost? Will car consumers — especially in the U.S. market — let skyrocketing fuel prices drive their car-buying decisions?
Nano Ready by September
25 models of world's cheapest car would be ready to roll out of Tata's Singur factory by 15 September 2008. The factory has swung into high gear to roll out its first batch of cars. It would be precisely a fortnight before the popular car was scheduled to hit the Indian roads
The trial run of the pilot batch shall begin in September; however, the company still remains tight lipped about the number of cars that shall roll out of its Singur factory in Orissa. Vendors for Tata Nano have been asked to supply their auto components mid-August to first week of September. Some of the auto component makers are setting up their plants near the Tata Nano factory but Tata Motors has indicated that even if the plants are not ready to supply the components, vendors would need to ship the components to meet the deadline.
Caparo Group, JBM Auto, Rucha Engineering, Rasandik Engineering, etc. are some of the key suppliers for Tata Nano. They shall be supplying the core sheet metal for Nano. “Sheet metal is an important part of a car required for its outer body structure. We have been asked by Tata Motors to be ready with our supplies by mid-August,” says Umesh Dashrathi, Managing Director of Rucha Engineering.
Halfords Sales Increase on Car-Maintenance Demand
Halfords Group Plc, the U.K.'s largest retailer of car parts and bicycles, said first-quarter sales rose 1.7 percent on demand for auto-maintenance products. Revenue was little changed at stores open at least a year in the 13 weeks ended June 27 because of Easter's timing, gaining 0.2 percent, the Redditch, England-based company said today in a statement. Profit for the period beat its forecast. More people are opting to repair vehicles, rather than buy new ones, because of increasing pressure on disposable incomes, the retailer said last month. Halfords stocks parts for 90 percent of cars in the U.K. and has added specialized products such as oils for Bayerische Motoren Werke AG and Volkswagen AG autos to lure more customers.
``We've had a mix toward our higher-margin car-maintenance category,'' acting joint Managing Director Nick Wharton said on a conference call of the increase in earnings. He also cited cost controls. The gross margin, a profitability gauge, was ``slightly'' better than forecast for the quarter and above the upper range of its prediction, the retailer said. Halfords maintained its forecast for an annual margin no more than 0.2 percentage point wider or narrower than in the prior year, citing an expected pickup in demand for leisure goods such as camping gear.
Shares Climb
``The earnings risks look moderate,'' Paul Deacon, an analyst at Landsbanki Securities in London with a ``hold'' recommendation on the stock, said in a research report. ``Halfords has very strong defensive characteristics,'' said Deacon, who estimates annual sales growth at 2 percent.
Halford gained 20 pence, or 7.2 percent, to 296.5 pence in London trading. The advance was the biggest in a week. The stock has dropped 1.7 percent this year, less than the 19-company FTSE 350 General Retailers Index's 32 percent slide. Easter fell in March this year, rather than in April as in 2007. Sales were ``particularly strong'' in the year-earlier quarter because of the holiday's timing, the retailer said. Demand for camping gear, cycling products and other leisure goods probably will pick up in coming months as car-maintenance sales wane, Wharton said. Record fuel prices helped to stoke bike sales during the fiscal year.
More Stores
More Britons are opting for camping vacations at home instead of foreign travel, outdoor-gear retailer Blacks Leisure Group Plc said last week, as surging oil prices force airlines to increase ticket prices and fuel surcharges. Demand for camping equipment spurred a 6.1 percent gain in same-store sales this month, Blacks said. Halfords opened three new stores in the quarter, Wharton said. It's adding three more Czech shops this year and plans to add between 15 and 20 in the U.K. and Ireland to tap demand for bicycles as consumers opt for ``green'' transportation.
The retailer also is sponsoring Britain's cycling team during the Beijing Olympics to spotlight its specialist Bikehut brand. Halfords sells one in every three bikes in the U.K. and has a partnership with Chris Boardman, who won a gold medal for Britain in cycling at the 1992 Olympic Games in Barcelona, to fuel sales.
Source: http://www.bloomberg.com/apps/news?pid=20601102&sid=aIr_a1fMoh94&refer=uk
CII Delegation at WTO Mini-Ministerial
A delegation of the Confederation of Indian Industry (CII) is in Geneva for the mini-Ministerial meeting of the World Trade Organisation (WTO). The delegation which comprises of members including automotives (Society of Indian Automobile Manufacturers Association (SIAM)) and automotive components sector (Auto Components Manufacturers Association (ACMA)) will push for development friendly outcome of the Doha Round by year end.
In its visit the CII delegation will also hold talks with industry associations from Europe, United States (US) and other countries. In the meetings with the counterpart associations, the CII delegation will express it’s discontent with the current NAMA Text, especially with two sensitive clauses of sectorals and anti-concentration.
CII delegation is of the view that the current NAMA Text doesn’t take into consideration the aspirations of developing countries. Industry in India feels that any negotiations on sectorals and anti-concentration will belittle the development mandate of the Doha Round, the CII delegation said.
CII delegation will also seek views of counterpart associations in the area of services negotiations. CII is of the view that any agreement on Doha should have a strong services component.
Source: www.cii.in
Slow replantations to cut rubber output
Industries ranging from tyre and auto components to footwear which use natural rubber (NR) as a raw material may face a supply bottleneck. This is because the natural rubber replantation rate in India has been on the decline over the last four years. Growers do not want to re-plant considering that the price of natural rubber has shot up. The economic life of a rubber tree is reckoned to be close to 35 years including seven years of the growing phase. Since these trees cannot be profitably tapped before seven years, farmers tend to avoid replantation and instead continue to tap the old trees. Replantation becomes critical since with age the quantity and quality of latex declines.
According to an analysis done by the Delhi based Automotive Tyre Manufacturers Association (ATMA), India’s share in total NR replantation in South Asia has dropped from 10% in 2004 at 7,000 hectares (ha) to 3.6% in 2007 at 6900 ha. The association has attributed the drop to rise in the price of NR by 49% to Rs 130 per kg currently from Rs 85 levels in September last year. Prices of natural rubber have been on the upswing following the global rally with the rise in crude oil prices. High crude oil price increases the price of synthetic rubber fuelling concerns about users shifting to natural rubber.
ATMA director general Rajiv Budhraja said that if the replantation rate continues to drop the industry may face supply problems from 2011 to 2012. “There will be a drop in yield which has already peaked (1,767 kg per ha per annum) and the production will also decline in medium to long term,” he said. Of the total domestic production more than half (57%) is accounted for by the tyre industry. Cochin Rubber Merchants Association president N Radhakrishnan said that if the replantation rate goes down NR production will fall short to meet the growing demand and country will have to depend on imports. “The government need to increase the incentives for replantation,” he said.
Consumption of natural rubber in India is growing and in 2007 it grew by 4.4% at 850,000 against 815,000 in 2006. The tyre industry has projected a growth of 5% for the current year (2008-09) at 521,000 tones. NR production in 2007-08 registered a drop of 3.2% at 825,345 tonnes. However, the projections for 2008-09 is up by 6% at 875,000 but consumption is projected at 899,000.
There is already a demand-supply mismatch projected in 2008-09. To provide a thrust to replantation activity, the government provides subsidy to the growers. However, the subsidy provided by the government to the NR growers for replantation at the rate of Rs 20,000 per hectare is considered too low by the growers to opt for replantation. ATMA chairman RP Singhania said: “It is important that replantation subsidies are hiked to levels sufficient enough to embolden the growers to successfully pass through the unproductive phase of NR plantation,” added Mr Singhania.
Nuts and bolts: The latest in automotive world
As per international media reports, Audi A1 supermini is expected to go on sale in March 2010. The company’s secret documents were leaked which has indicated that the car would be on sale in 2010. Also international media has reported Audi A1’s new line-up of four-cylinder launch engines. The petrol model range begins with an 86bhp, 1.2-litre petrol engine. New diesel engines include a 1.6-litre common rail injection with 90 bhp or a range-topping 2.0-litre common rail unit.
Japanese auto major Nissan Motor Co on Tuesday said it has identified India as one of the five low cost countries to manufacture its new generation compact cars, including the Micra. “Nissan will compete in the entry-car market with a dedicated new A platform that will be used for at least three models, including the next generation of Micra, and will be built in five Leading Competitive Countries (LCCs),” the company said in a statement. The company said production sites for the new family of compact cars would include the new plant in Chennai being constructed by the Renault-Nissan Alliance. The development of a competitive A platform is one of several business breakthroughs announced as part of Nissan GT 2012, the company’s new five-year business plan, it added.
German luxury car maker Audi on Tuesday said it would launch its A4 sedan in July. “The new Audi A4 will be a very important model for India.... The Audi A4 holds a special significance with respect to achieve our proposed goal of more than 1,000 sold cars in India by the end of this year,” Audi India MD Benoit Tiers said.The A4 is a mid-size sedan with a length of 4.70 metres. Audi said in a statement that it is accepting orders for A4 at its dealerships in Delhi, Gurgaon, Chandigarh, Pune, Hyderabad and Bangalore. A4 is priced at Rs 29,00,000. The Audi range in India includes A8, Q7, A6, A4 and TT. The company has seven dealerships in India.
In a complete reversal of international trends, new cars in India are spewing more greenhouse gases than older models, pushing up emissions in Delhi alone by 72% in five years (2002-07), the Centre for Science and Environment said on Monday, releasing its analysis of emission data accessed from the Automotive Research Association of India. Emissions from two-wheelers in the same period, in comparison, have gone up by 61%, the analysis said. For the consumer, this might be a pointer to deteriorating fuel efficiency of new cars as well - emissions of carbon dioxide are closely linked to the fuel efficiency of vehicles. The ARAI had clubbed data of vehicles of different periods that CSE accessed. The cars and two-wheelers had been classified into groups ranging from 1991-96, 1996-2000, post-2000 and post-2005. The post-2000 petrol cars, with engine size more than 1,400cc, emit 143gm/km of CO². In comparison, post-2005 models of same engine size emit 173gm/km, CSE said. Extrapolating the emission statistics for fuel efficiency, the centre said the figures implied that fuel economy had dropped in these cars from 16km/litre to 13km/litre
Sixty cars that will rock India in 2008
On offer would be everything from haute hatchbacks and green tech hybrids to adrenalin-dripping super premium luxury models. Not to mention the world’s cheapest automobile, the Rs 1 lakh people’s car from Tata Motors. As usual, the biggest action will be in the small car market where global best-sellers will rub shoulders with locally-developed tarmac scorchers. Maruti Suzuki will kick off the action with its Splash and A-Star concept, though the latter would be a predominantly export model. In the premium hatchback category, the Swift, Getz, U-VA troika will face competition from the likes of the Skoda Fabia and the Fiat Grande Punto, though all eyes would definitely be on the Rs 1-lakh car.
The mid-size market would sizzle too with debutantes like the i20 from Hyundai, Logan-spawned Sandero from Renault, the Jetta from Volkswagen and the Linea from Fiat. Add to that the Swift sedan and the new launches cover every price point in that segment. The Fiat Bravo and the Mistubishi Lancer Gallant will keep the debut buzz alive and kicking in the mid-size premium segment. But some of the sexiest newcomers next year will be 4x4 muscle-flexers. While Mitsubishi is all set to bring along its Outlander sports utility vehicle (SUV), GM will roll out its Captiva, Hyundai the Santa Fe and BMW the X6. So if you like your vehicle BIG and MACHO, you’ll have plenty to choose from next year.
In the luxe car space too there will be plenty of action with the all new C Class from Daimler and the BMW M5 & M6 expected to be the star eye candies. Of course, Indian car majors have lined up a range of locally developed beauties — including both new platform products as well as makeover versions. Mahindra & Mahindra (M&M), for instance, will launch its new multi-utility vehicle Ingenio while Tata Motors will roll out the next generation Sumo and the new pick-up truck Xenon (besides the Rs 1-lakh car). Current best-sellers like the Santro, Indica and Toyota Innova will also see an alternative avatar thanks to the growing demand for CNG/LPG options. At the higher price bracket, several hybrid options will debut, including the Honda Civic, Tata Indica and M&M Scorpio SUV.
Okay so there will a rush of new models; but will they be affordable? More or less. Car makers are eyeing the big excitement generated by these new launches to grab incremental sales in a market that hasn’t been too perky this year. Which means every debutante will pack in better quality and features at an attractive price to grab the most eyeballs and footfalls. And that would include both international models as well as the locally developed lineup. Some of these cars will premier in India first, like the recently-launched Hyundai i10 and Maruti SX4. As increasing competition force car makers to bring latest launches to this market, the first premiered in India tag will become a common one. The 1.4 million unit strong Indian passenger car market will display more than 100 potential models at the Auto Expo in January though many of them are slated for an entry beyond 2008.
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Skills shortage is the biggest concern in auto industry
The automotive industry is perhaps the first truly globalised industry. The two largest and growing markets are India and China. Sanjay D Rishi, global leader, automotive industry, global business services, IBM, leads a team which is working on a report on the face of the automotive industry in 2020. He spoke to ET on the different challenges posed and faced by the two countries as well as other major drivers for the industry.
What are the major concerns of the automotive industry? Skills shortage is the biggest concern that all automotive companies are facing. To that extent, this is a level playing field with limited talent available for everyone, Indian or other original equipment manufacturers (OEMs). New skills are needed for the vehicles of the future, which will be fundamentally different from what we have today on account of the technology. The new skills required are in areas like a seamless integration of code, engine control units, new components and getting all these to work together.
In India, all this is new to the automotive industry. OEMs are therefore setting up design and embedded systems centres in India. India is a new entrant in this industry and so it may look at a quick fix solution, to acquire companies in the developed markets, especially in Europe. But ultimately design engineering capability has to get into the DNA of the company, to move forward as companies get global.
Indian companies are developing design engineering capabilities and are leveraging their manufacturing capability to grow outside India. This shortage of core skills, of design engineering and embedded systems, needs to be addressed all over the world. The top layer of people with these new skills are required by all OEMs.
How would you compare the two big markets, India and China? The domestic Indian automotive industry has done well, built on technology that has been developed locally. Chinese OEMs, on the other hand, have done well learning through joint ventures, creating a manufacturing footprint and capacities, all of which are large. OEMs from both countries will go after developed country markets. However, global OEMs, through their existing global footprint, have a differentiator.
The value that OEMs from these two countries bring is the low-cost small vehicle with great mileage. OEMs in the US cannot build low-cost vehicles in the US so you get the example of Chrysler looking at China’s Chery. There is a wonderful coincidence, too, for Indian and Chinese OEMs, of a need created coupled with existing capabilities, to use this opportunity to go towards green vehicles. They need to use this opportunity. The global concerns with the India location is over regulation while it is over IP protection when it comes to China. Infrastructure and frequent changes in regulation are a worry when it comes to India.
Where do you see the convergence of the automotive sector with other sectors? There is already a convergence happening between several industries and eco-systems such as electronics and oil & gas. These industries need to co-exist cohesively. For instance, the oil & gas industry grew hand-in-had with the automotive industry, sharing market growth. But with the growth of alternative energy, all players may not be on the same page or in tune with each other, making competitors of former partners. Or take the electronics industry and automotives: both were loosely tied but are now very close. This is driven by demand.
What has been the global impact of the launch of the Nano? It has significantly transformed industry in multiple ways, starting with a demonstration of the art of the possible. That it is viable to develop an internal combustion engine driven car for $2,500. This has brought down the definition of the low-cost car from $7,000-8,000. It is now possible to think of a low-cost car at $5,000.
Moreover, the Nano has not been de-contented to meet a price target. The car has been designed to meet needs of the Indian market. It has created a new segment for the future with a significant growth opportunity in Africa, Vietnam, etc. Later, it could pack luxury on it to become a very small luxury vehicle; that is possible. It could also have a green or sustainable version. A new segment has been created and there are ripples across the industry because of this and it will affect close segments
GM signs MoU to train ITI students in automotive technology
Auto major General Motors India on Monday signed an agreement with the Gujarat government for providing training to students of the Tarsali Industrial Training Institute. Under the memorandum of understanding, GM India would develop and provide technical courses on automotive technology through Tarsali ITI. The MoU was signed between President and Managing Director of General Motors India Karly Slym and state's Industry Commissioner Sujith Gulati and Director (Employment and Training) C V Some in the presence of Minister of State for Industries Saurabh Patel.
"The courses would leverage GM's global resources and take advantage of expertise at manufacturing facility at Halol in Gujarat and GM technical centre in Bangalore. The GM will also contribute in upgrading the existing infrastructure at the institute and assist in providing other course related benefits," Slym said. "There is considerable shortage in getting trained manpower in automotive sector. The first of its kind experiment will help develop skills in students," he added. "GM will assist in designing the course content and securing external faculty, we would also sponsor trainees as apprentices in our organisation," Slym further said.
Umicore to build automotive catalyst plant in India by 2010
Brussels-based materials technology group Umicore on Friday said it plans to set up an automotive catalyst operation in India by 2010 with a capacity to equip approximately 1.5 million cars yearly. "The investment will involve the development of a greenfield site with a production capacity allowing to equip approximately 1.5 million cars yearly," Umicore said in a release on its website. It is anticipated that construction will be completed by 2010 and production will begin soon after, it added. In a bid to strengthen its presence in the Indian automotive emissions market, Umicore said it will also expand its current commercial and technical application services for the region.
At present, Umicore serves the Indian automotive market through its local sales and engineering office in Pune and utilises its global manufacturing footprint to support the local demand of the automotive manufacturers. According to the company, the Indian market is experiencing increased demand for personal mobility and progress in development of road network besides strengthening of automotive emissions legislation.
"The investment will enable Umicore to serve both global and local automotive producers in this growing market and will provide customers with the full range of the company's competencies in the field of catalysis, precious metal chemistry and applied technology," the company said.
SME's At Risk With Current Proposals on NAMA
The Confederation of Indian Industry (CII) has called for strong market access proposals from developed countries on services trade in the ongoing mini-Ministerial of the World Trade Organisation (WTO). Mr. Chandrajit Banerjee, Director General, CII said that for a balanced outcome of the Doha Round, the Services Signalling Conference scheduled for 24 July, must lead to meaningful trade liberalisation commitments in Services from developed countries, especially in two modes of supply of interest to developing countries - Mode I and Mode IV.
In a statement issued here today, Mr. Banerjee exuberated confidence in the leadership of Mr. Kamal Nath, Minister of Commerce & Industry and Mr. GK Pillai, Secretary, Department of Commerce and said that under the stewardship of both Mr. Nath and Mr. Pillai, India will make positive move forward for a development friendly successful conclusion of the Doha Round.
On NAMA (industrial goods) negotiations, CII Director General said, Indian industry is deeply worried about three areas of negotiations - sectorals, anti concentration and remanufactured goods. Expressing CII's serious concern on sectoral negotiations, Mr. Banerjee said that the sectors currently proposed by US and other developed countries will adversely impact sensitive industrial sectors in India. He said small and medium enterprises in sectoral proposals on chemicals, textiles & clothing, industrial machinery and electronics and electrical components besides auto and auto components, would be the hardest hit. Mr. Banerjee added that many of the tariff lines, which were left unbound after the Uruguay Round were from many of these sensitive sectors.
On anti-concentration Mr, Banerjee said Indian Industry is completely opposed to any caveats on flexibilities. He said that the present text does not reflect development imperatives of developing countries and therefore should be dropped from the texts.
While expressing CII's concern with negotiations on remanufactured goods, Mr. Banerjee said that this issue should not figure at the multilateral level, since there is no consensus even on the definition of remanufactured goods.
Mr. Banerjee said that the CII delegation, which includes members from Society of Indian Automobile Manufacturers (SIAM), Automotive Component Manufacturers Association of India (ACMA) is in Geneva for the mini-Ministerial. He said the delegation is holding talks with industry associations from EU, US and South Africa among others. Mr. Banerjee added that in the meeting with the counterpart associations, the CII delegation is clearly indicating their concerns on these three critical areas of NAMA negotiations as well as in the area of services.
On agricultural negotiations Mr. Banerjee said there have been proposals on tariff cuts and Overall Trade Distorting Subsidies (OTDS). However, most of these proposals are conditional and not stand alone provisions. Hence, these proposals do not lead to meaningful market access for developing countries
Source: http://www.webnewswire.com/node/445104
